No, that's not any lake that's currently in existence. Echo would be much closer to the Notch. Maybe the picture itself is clearer, but my first guess would be that that's a field. If it is, in fact, water, it must be some sort of a man-made body from the Gale being dammed up somewhere, either from the old iron works or a mill or something. But it looks to me like it's upstream from town, not right in town, which would eliminate the ironworks.
Lovett's field is a possibility (near where Black Brook hits Lafayette brook and 141 branches off), or perhaps the field across from the fire station -- which might well have been flooded at some point in time as it's not much higher than Gale level.
And yes, cool picture. Do you have any more from that era?
ETA: And yes, I would agree that that is from the 117 area of Sugar Hill, probably up in the neighborhood of Polly's.